EMERGING insurance firm Steadfast Group said the former QBE chief Frank O'Halloran was a "logical choice" to take charge as chairman as it prepared for a stockmarket listing next May.
Mr O'Halloran, who was planning to join the QBE board next year, surprised investors when late on Friday he detailed plans to head up the Steadfast board.
The appointment of Mr O'Halloran comes less than two months after he retired from QBE following a 12-year stint as its chief executive.
In taking on the role at Steadfast, QBE's board has offered to waive a non-compete clause in his contract which would have prevented Mr O'Halloran from acting for an insurance company or related business for three years from his retirement.
The executive chairman of Steadfast, Robert Kelly, said plans for the initial public offer were well under way and Mr O'Halloran was the logical choice for the insurance broker network.
"We do $760 million worth of business with QBE annually, we've had a long-standing relationship with them for many years. We've worked very closely with [Frank] over that time," Mr Kelly said yesterday.
Steadfast is aiming to float its business in May next year. JPMorgan and Macquarie Capital have been selected as joint lead managers to the planned float.
The Steadfast model sees insurance brokers band together to negotiate wholesale insurance rates with the major insurers. This is then sold to the customers of insurance brokers. Steadfast is planning to take ownership stakes in more than 100 insurance brokers. This would see it emerge as a rival to the listed insurance broker network Austbrokers Holdings.
Still, the appointment of Mr O'Halloran to a business that seeks to drive down premiums from players such as QBE raised questions among investors. Mr O'Halloran is well known in the insurance broking community and has intimate knowledge of QBE's pricing models.
There are more than 400 Steadfast brokers' offices nationally, with sales of $4.1 billion and annual revenues of about $700 million. Analysts calculate Steadfast would be valued at about $440 million based on its future earnings growth.
Mr O'Halloran was travelling overseas yesterday and was unavailable for comment.
The chairman of QBE, Belinda Hutchinson, said Mr O'Halloran "is passionate about the insurance industry, and feels that his expertise would add a great deal at Steadfast Group with its plans to list on the ASX". However, given QBE underwrites 17 per cent of Steadfast's insurance, the QBE board and Mr O'Halloran "agreed that he will not return to the QBE board in 2013 as originally envisaged".
Frequently Asked Questions about this Article…
Who is Frank O'Halloran and why was he appointed Steadfast Group chairman?
Frank O'Halloran is the former long-serving chief executive of QBE (retired after a 12-year stint). Steadfast named him chairman as it prepares for a planned stockmarket listing, with its executive chairman calling him a "logical choice" given his industry experience.
When is Steadfast planning its stockmarket listing and who are the joint lead managers?
Steadfast is aiming to float its business in May next year, and has selected JPMorgan and Macquarie Capital as joint lead managers for the planned listing.
How does the Steadfast insurance broker model work and why does it matter to investors?
Steadfast bands insurance brokers together to negotiate wholesale insurance rates with major insurers, then sells those products to brokers' customers. It also plans to take ownership stakes in more than 100 brokers, positioning it as a consolidated insurance broker network and a potential rival to listed peer Austbrokers Holdings — a structural factor investors should note.
How large is Steadfast now in terms of offices, sales and revenue?
According to the article, Steadfast has more than 400 brokers' offices nationwide, total sales of about $4.1 billion and annual revenues of roughly $700 million.
What valuation have analysts suggested for Steadfast ahead of the float?
Analysts calculate Steadfast would be valued at about $440 million based on its expected future earnings growth, according to the article.
Are there any potential conflicts or investor concerns around O'Halloran joining Steadfast?
Some investors raised questions because O'Halloran has intimate knowledge of QBE's pricing models and Steadfast's aim to drive down premiums could affect major insurers. The QBE board agreed to waive a non-compete clause that would otherwise have prevented him from acting for an insurance-related business for three years after retirement.
How much business does Steadfast do with QBE and how does that relationship affect the appointment?
Steadfast does about $760 million worth of business annually with QBE, and QBE underwrites around 17% of Steadfast's insurance. QBE's chair said O'Halloran's expertise would add value to Steadfast's ASX listing plans, but the QBE board and O'Halloran agreed he will not return to the QBE board in 2013 as originally envisaged.
What key facts should everyday investors consider about the upcoming Steadfast IPO?
Everyday investors looking at the Steadfast float should note its planned May listing, JPMorgan and Macquarie Capital as joint lead managers, the broker-network business model, scale (400+ offices, $4.1bn sales, ~$700m revenue), an analysts' valuation of about $440m, and potential governance or conflict questions linked to Frank O'Halloran's recent move from QBE.
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